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cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience:  Bankruptcy professor.
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I was divorced over a yr ago and am paying for mine and my

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I was divorced over a yr ago and am paying for mine and my ex-husbands house and all the bills we had together plus my apt and my own bills. The house has been on the market (a $700,00 house we are asking well below that for) over a yr now, and I have been living on credit cards to pay everything. Once the house sells, I will no longer be responsible for all of this, but I got screwed in the divorce and I am the bread-winner. So, my question is: if I file bankruptcy, what will happen to the house, my $200,000 retirement fund, my credit? I have been advised not to try the credit counseling services because I have so much credit card debt (almost $50,000) and it would be cost-prohibitive to pay them and try to pay off my cards. Is there another way to go?
Submitted: 5 years ago.
Category: Bankruptcy Law
Expert:  cfortunato replied 5 years ago.

Hi JACustomer,

What is the balance on the mortgage?


Customer: replied 5 years ago.

We have a first mortgage for $480,000 and a second for $77,000.

Expert:  cfortunato replied 5 years ago.
If the house can sell for more than around $585,000 (balance of the mortgages plus around 5% cost to sell), the Bankrutpcy court can take the house. If the house cannot sell for more than the mortgages, which means the house has no equity, you would be able to keep the house.
Your retirement account would be exempt (protected) from the Bankrutpcy court - as long as it is a tax-deferred account.

I think this is what you wanted to know. If not, please let me know.
Thank you!
cfortunato and other Bankruptcy Law Specialists are ready to help you
Customer: replied 5 years ago.
Would my wages be garnished to help pay back any of the loans I defaulted on with bankruptcy? I do have a good job and make decent money, and I feel horrible to even have to consider this option, but I'm at a desperate place. Would you advise credit counseling first?
Expert:  cfortunato replied 5 years ago.

Thank you for accepting my answer!

If you file a Bankruptcy, your wages cannot be garnished to pay the debts that are discharged in the Bankrutpcy.

Credit counseling is not usually better than a Bankruptcy - even if you can find a reputable credit counseling program - as with a Bankruptcy all unsecured debts are discharged. With credit counseling, there is often at least one creditor who will not participate, which means the debt to that creditor(s) will still be owed at the end of the credit counseling program.

Customer: replied 5 years ago.

Is there a requirement to go through some sort of credit counseling program before I can file bankruptcy? And if I do go that route, do I need to find a bankruptcy attorney to do this? One more question, I promise: Which would be more damaging to me, to file bankruptcy or to foreclose on my house (and once I did that, I would have the means to pay all my other debt)?

Thanks for your help.


Expert:  cfortunato replied 5 years ago.

Yes - Credit Counseling Course that you must take before filing a Bankruptcy. The course takes about one hour to complete, can be taken online, and costs $50 or less.

Although not necessary, it is highly recommended that you use a Bankruptcy attorney, as filing a Bankruptcy is very complicated, and required completion of a 60-page petition. A good way to find a Bankruptcy attorney who knows what he is doing is to call the Tennessee Bar Association to ask for a recommendation. The number is 800-899-6993.

Both a foreclosure and a Bankruptcy have a similar negative affect on one's credit report. However, a Bankrutpcy remains on the credit report for up to 10 years, and a foreclosure remains for up to 7 years.

The problem with a foreclosure is if the mortgage company sells the house for less than the balance on the mortgage, they can get a deficiency judgment for the difference. This judgment could be used to garnish wages, unless you do file a Bankruptcy - which you can do after the house forecloses. (So it is possible to have a foreclosure and a Bankruptcy.)